The 2024 Guide to San Marino Tax

Valentino Coletto
Padua

More than 5,000 companies are incorporated in San Marino, and more than 7,000 workers and employees commute daily from Italy to work in San Marino.

For such a small community, totaling approximately 33.000 residents, these are relatively high figures. They do, however, highlight San Marino’s business-friendly environment.

One of the reasons for this is that San Marino has a reduced level of bureaucracy that makes it easier to invest and do business with less time, less effort, and lower costs.

Another primary reason for that attractiveness is the favorable tax system.

San Marino maintains a streamlined tax system that sets it apart from Italy and most European nations. Its reduced taxation rates offer clear advantages while avoiding tax haven status.

The country abolished bank secrecy and anonymous shareholding, demonstrating its commitment to transparency. The nation now exchanges financial information under OECD Common Reporting Standards.

San Marino’s 2013 general framework law establishes one general income tax for all income categories.

Every type of company pays income tax in San Marino – both legal entities and individual companies run by natural persons. Private persons also fall under the income tax system.

San Marino offers two main company structures: limited liability companies requiring €25,500 minimum capital and joint stock companies requiring €77,000 minimum capital.

Private persons face progressive tax rates, while companies pay proportional rates, regardless of their structure.

Eight tax brackets determine private taxation, starting at 9% for incomes under €10,000 and reaching 35% for incomes over €80,000.

Companies pay a flat 17% tax rate.

Legal entity shareholders receive dividends tax-free, while individual shareholders pay a 5% withholding tax on distributions.

San Marino’s main tax incentives include:

• Companies holding qualifying shares for at least 12 months and reporting them as financial fixed assets since acquisition qualify for capital gains tax exemption.
• Businesses can offset up to 80% of their losses against taxable income for three years.
• The tax code encourages reinvestment by exempting profits allocated to fixed assets and capital goods over five years when used for technological upgrades, real estate improvements, energy efficiency, or environmental protection.v
• Companies increasing their share capital receive a tax exemption of 10% of the added amount.

San Marino’s Special Tax Regimes

NewCo Regime

New companies qualify for a 50% reduction on the standard 17% income tax for five years, reducing it to 8.5%. They also receive a four-year tax license exemption.

Companies must hire their first employee within six months and a second within 24 months.

StartUp Regime

High-tech and innovative startups receive full income tax exemption for three years. They then pay 4% for the next four years and 8% for the following five years.

The tax license exemption extends to seven years. Corporate investors can deduct capital injections at 60% in years one through three, 30% in years four through seven, and 15% in years eight through 12.

In the case of private investors, they can deduct 80%, 60%, and 20%, respectively.

For example, If a private investor invests in a qualifying San Marino startup, they can benefit as follows:

• Years 1-3: They can deduct 80% of their investment from their taxable income
• Years 4-7: They can deduct 60% of their investment from their taxable income
• Years 8-12: They can deduct 20% of their investment from their taxable income

Patent Box Regime

Companies can exempt portions of income from intellectual property that qualify under the specific ‘nexus ratio’ cost requirements.

When companies reinvest 90% of capital gains into other intellectual property within two years, those gains become tax-exempt.

Trust Company Regime

Trust companies pay the standard 17% tax rate. The taxable income equals either 80% of total proceeds or 10% of proceeds when reinvested and held for at least 24 months.

Holding Companies

For incoming dividends: Sammarinese holding companies holding shares for at least 12 months pay tax on only 5% of dividends received from companies in Double Tax Agreement countries after foreign withholding tax.

For outgoing dividends, Sammarinese subsidiaries distribute dividends to foreign holding companies with zero percent withholding tax, regardless of existing DTA provisions with the holding company’s country.

Maritime Companies

New maritime companies receive an 80% reduction on the standard 17% income tax for ten years, lowering it to 3.4%.

They qualify for a four-year tax license exemption by hiring their first employee within six months and a second within 24 months.

Additional tax credits apply to employee training programs and activities involving technological innovation and business development.

Business vessels transporting passengers or cargo operate exempt from consumer tax (VAT equivalent).

Investment Funds

Investment funds pay no income tax on their profits. Fund management companies pay a special 12% flat tax on their earnings.